The recent Stanbic Bank Kenya PMI® report has painted a grim picture for the country’s private sector in July. The ongoing protests and political instability have led to a steep decline in business activity, with the Purchasing Managers’ Index (PMI) plummeting to its lowest level since April 2021.
Key Findings from the PMI Report
According to the Stanbic Bank’s PMI Report for July, the headline PMI dropped sharply to 43.1 from 47.2 in June. This significant decline highlights the severe impact of the protests on the Kenyan economy. The PMI, which measures the performance of the private sector, showed marked deterioration in business conditions.
Impact on Business Activity and New Orders
The report indicates that output and new orders fell rapidly in July. Political instability and disruptions caused by protests led to a reluctance among customers to commit to new orders. Additionally, access to businesses was often blocked, preventing them from operating normally.
Inflation and Costs
Despite the disruptions, rates of inflation remained muted compared to the previous year. Input costs increased for the second consecutive month, leading to a further rise in selling prices. However, the rate of inflation was still much softer than seen during 2023.
Sector-Specific Impacts
The downturn in business activity was not uniform across all sectors. The agriculture sector experienced the sharpest decline, while the manufacturing sector was the only one to post a rise in output. This disparity highlights the varying impacts of political unrest on different industries.
Employment Trends
Interestingly, employment levels continued to rise, albeit at a slower pace. This increase was the slowest in the current seven-month sequence of rising staffing levels. Companies are seemingly preparing to address mounting backlogs exacerbated by the protests.
Business Confidence
Business confidence hit a low, only marginally above the series nadir posted in February. The uncertainty and disruptions caused by the protests have made it difficult for businesses to remain optimistic about the future.
Conclusion
The July PMI report underscores the urgent need for political stability to restore confidence in Kenya’s private sector. Without a resolution to the ongoing unrest, the country’s economic prospects remain uncertain. Businesses and policymakers must work together to navigate these challenging times and foster a more stable environment for economic growth.
